Question

1. The price of a Big Mac for a sample of McDonald’s restaurants in Europe in January 2014 resulted in the following Big Mac prices (after conversion to U.S. dollars): 5.18 4.95 4.07 4.68 5.22 4.67 4.14 4.98 5.15 5.56 5.36 4.60 The mean price of a Big Mac in the U.S. in January 2014 was $4.62. For purposes of this exercise, assume it is reasonable to regard the sample as representative of European McDonald’s restaurants. Does the sample provide convincing evidence that the mean January 2014 price of a Big Mac in Europe is greater than the reported U.S. price? Test the relevant hypotheses using α = 0.05. (a) State the pair of Hypothesis using proper notation and mathematical symbols. (b) What are the assumptions required to be valid for the hypothesis tests to be valid? (c) Find/Calculate the P-value for this hypothesis test (show full calculator syntax). (d) What is the decision (Reject H0 or Fail to Reject H0)? Give full supporting statistical reasoning to your decision by comparing the two appropriate values necessary. (e) Give the statistical and real-world conclusions corresponding this hypothesis test and put in context to the random variable involved.

Answer 1

Step 1 : Find the mean and standard deviation of the sample.

This is done in excel and formulas are given.

Step 2 : Hypothesis testing

Conclusion : We have sufficient evidence to support the claim that the mean January 2014 price of a Big Mac in Europe is greater than the reported U.S. price